Avian erythroblastosis virus (AEV) induces both erythroblastosis and fibrosarcomas in susceptible birds. Two domains within its replication-defective genome, erb-A and erb-B, have been implicated in AEV-mediated oncogenesis. An efficient transfection system for generating infectious, transforming virus from molecular clones of AEV and RAV-1 (helper virus) was combined with the techniques of site-specific mutagenesis to investigate the contribution of erb-B to the two forms of oncogenesis induced by AEV. Deletion and frameshift mutations were constructed in the erb-B locus of cloned AEV DNA in vitro. Infectious retroviruses harboring these mutations were recovered and their ability to transform fibroblasts in vitro or induce erythroleukemia in vivo was assessed. The presence of mutant viral genomes in chick embryo fibroblasts or erythroblasts of infected birds was confirmed by suitable biochemical analyses. Expression of viral genes in cells infected with AEV mutants was examined by immunoprecipitation with antisera to erb-A and erb-B proteins. It was found that the product of erb-B is necessary for transformation of fibroblasts and induction of erythroblastosis by AEV, although a small portion of this protein at the carboxy terminus is dispensable.